Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context for Competitive Advantage

strategic transportation

& tourism solutions

A Strategic Context for Competitive Advantage

Prepared forTransport Canada

Prepared byInterVISTAS Consulting Inc.

March 2007

TABLE OF CONTENTS

GLOSSARY OF TERMS..................................................................................... 1

EXECUTIVE SUMMARY..................................................................................... 2

1.0 INTRODUCTION................................................................................................ 4

2.0 CANADA IN THE GLOBAL ECONOMY................................................................. 6

2.1 Economic Growth and Trade............................................................................ 6

2.2 International Trade........................................................................................... 7

2.3 International Travel.......................................................................................... 8

2.4 Transportation Trends...................................................................................... 10

3.0 CANADA’S ASIA PACIFIC GATEWAY AND CORRIDOR............................... 11

3.1 Existing Gateway and Corridor.......................................................................... 11

3.2 Potential Opportunities for the Asia-Pacific Gateway and Corridor................... 13

3.3 Gateway and Corridor Vision............................................................................ 13

3.4 Economic Significance of the Gateway and Corridor......................................... 15

3.5 Performance Targets and Measuring Success................................................... 16

4.0 STRATEGIC ISSUES AND CHALLENGES............................................................. 184.1 Gateway and Corridor Capacity......................................................................... 18

4.2 Effective Governance and Coordination............................................................ 21

4.3 Security and Border Efficiency.......................................................................... 22

4.4 Human Resources............................................................................................. 24

4.5 Pro-Competitive Policy Framework.................................................................. 25

5.0 TOWARDS COMPETITIVE ADVANTAGE............................................................. 28

.0

1 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007

Glossary of Terms

ALR – Agricultural Land Reserve

APEC – Asia Pacific Economic Cooperation

APGC – Asia Pacific Gateway and Corridor

APGCI – Asia Pacific Gateway and Corridor Initiative

BNSF – Burlington Northern Santa Fe Railway

CANPASS – CBSA program for expedited clearance of

prescreened travellers

CATSA – Canadian Air Transport Security Authority

CBRN – Chemical/Biological/Radiation/Nuclear

CBSA – Canada Border Services Agency

CN – Canadian National Railway Company

CP – Canadian Pacific Railway

EDC – Export Development Canada

FTZ – Foreign Trade Zone

GDP– Gross Domestic Product

G8 – Members include U.S., Canada, France, Germany,

Italy, U.K., Russia and Japan

GVGC– Greater Vancouver Gateway Council

HRSDC – Human Resources and Social Development

Canada

ICAO – International Civil Aviation Organization

IMO – International Maritime Organization

ITS – Intelligent Transportation Systems

NAFTA – North America Free Trade Agreement

NEXUS/FAST – Border facilitation partnership programs

between CBSA and U.S. Customs and Border Protection

PILT – Payment in Lieu of Taxes

PSEPC – Public Safety and Emergency Preparedness

Canada

P3 – Public-Private Partnership

RFID – Radio Frequency Identification

RO/RO – Roll-on/Roll-off

RPK – Revenue Passenger Kilometres (number of passen-

gers on flight X distance of flight in kilometres)

SPP – Security and Prosperity Partnership of North

America

TEU – Twenty-Foot Equivalent Unit

TWOV – Transit Without Visa

VPA – Vancouver Port Authority

YVR – Vancouver International Airport


EXECUTIVE SUMMARY

The history of Canada is closely tied to the development of trade, and the

development of our cities as gateways for trade.

Today, building Canada’s Asia-Pacific Gateway and Corridor (APGC) is a top

priority. As a small, open economy, dependent on trade, Canada’s future

success will be determined in large measure by our ability to move goods

and people reliably and efficiently in global supply chains and routings.

While the U.S. has been Canada’s primary trading partner in the past,

rapidly developing economies in China, India and Southeast Asia represent

the greatest opportunities for the future. These countries can generate

significant new markets for our products and services, as well as inbound

tourism to Canada.

Situated between Asia and the U.S., our ports and airports on the west

coast are also ideally situated to capture a portion of the growing traffic

between these major trading partners. Capturing a larger market share of

this gateway traffic would generate significant economic benefits for all of

Canada.

Vision

The proposed vision for the Aisa-Pacific Gateway and Corridor is intended

to capture all of these elements:

Canada’s Asia-Pacific Gateway and Corridor will be the preferred transportation network for connecting a significant share of the transpacific flow of global commerce between the growing markets of Asia and North America, well into the 21st century.

Performance Targets and Measuring SuccessThe suggested performance measures for the four specific targets of the

APGCI are:

Target 1: Boost Canada’s commerce with the Asia-Pacific region, as measured by:Measure 1a: Canada’s Asia-Pacific import trade volume.

Measure 1b: Canada’s Asia-Pacific export trade volume.

Measure 1c: Canada’s Asia-Pacific tourism receipts.

Target 2: Increase Canada’s traffic volumes to/from the Asia-Pacific region, as measured by:Measure 2a: Canada’s Asia-Pacific two-way sea container traffic flow.

Measure 2b: Canada’s Asia-Pacific two-way air passenger traffic flow.

Measure 2c: Canada’s Asia-Pacific two-way air cargo traffic

flow.

Target 3: Increase the APGC’s share of North America bound traffic from Asia, as measured by:Measure 3a: Canada’s APGC share of Asia-NAFTA container traffic.

Measure 3b: Canada’s APGC share of Asia-NAFTA air passenger traffic.

Measure 3c: Canada’s APGC share of Asia-NAFTA air cargo traffic.

Target 4: Improve the efficiency and reliability of the APGC for Canadian and North American exports. Measure 4a: Delivery reliability from the APGC to both Central Canada and the U.S. Midwest.

Measure 4b: Shipment transportation times through the Lower Mainland, Prince Rupert and Pan-Western corridors.

Measure 4c: Work stoppages.

Core Elements

In order for the APGC to realize its vision, long term improvements must

me made in several core and integrated areas.

Optimizing and ExpandingGatewayCorridorCapacity

Fostering a Market-Driven

and Pro-Competitive

PolicyFramework

EnhancingHuman

Resources and CollectiveBargaining

PromotingEffective

CorporateGovernance

EstablishingSecure and SeamlessBorders

The strategic initiatives that should be pursued in each core area to realize the vision of the APGC are summarized in the table below.

The Government of Canada should consider:

Gateway and Corridor CapacityDeveloping a comprehensive simulation program to deter-

mine relative impacts of different infrastructure investments

and strategies in the APGC.

Continuing to promote innovative processes to expand

capacity and efficiency of the APGC, including working with

industry to implement 24 hour operations.

Adding a selection criteria that explicitly includes projects

that improve the processing of goods and passengers at

border points.

Continuing to develop new financing mechanisms to fund

infrastructure.

Working with provincial governments to develop a

harmonized accelerated environmental impact assessment

mechanism for high-priority gateway projects.

Security and Border Efficiency

Aggressively pursuing opportunities to implement new

approaches to minimize or eliminate dual clearance pro-

cesses.

Taking a lead role in encouraging harmonization and mutual

recognition of transport and border security policies in the

Asia Pacific region.

Aggressively pursuing perimeter clearance with the U.S.

Human ResourcesFacilitating targeted immigration to address current and

anticipated chronic labour shortages.

Working with provincial governments to establish transpor-

tation, logistics, and supply chain management as a national

priority for skills training and education.

Developing new, innovate forms of mediation and arbitration

to prevent work stoppages in the transportation sector.Effective Governance and CoordinationWorking with provincial governments to establish “Trans-

portation Land Reserves” to protect critical gateway land

and rights of way for future development.

Undertaking a global review of best practices in governance

structures to determine if further changes are required to

port, airport, and related transportation entities to enhance

the competitiveness of the APGC.

Developing pilot projects for APGC facilities which would

increase the role of the private sector and investors in the

delivery of infrastructure and services.

Continuing to work with the three lower mainland Port

Authorities to amalgamate them in 2007.

Working with municipalities to consider changing the cur-

rent property tax structure for gateway facilities from a PILT

model to one based on throughput.

Pro-Competitive Policy FrameworkIncorporating APGC performance measures in all relevant

departments, or take other steps to achieve internal align-

ment of goals.

Working with provincial and municipal governments to

review all relevant taxation policies to ensure that they do

not impede the competitive position of the APGC.

Overhauling Canada’s EDC program to make Canada more

attractive for foreign investment in value-added gateway

activity.

Reviewing airline foreign ownership limit.



The history of Canada is closely tied to the development of trade, and the

development of our cities as gateways and corridors for trade. From the

early days of settlements that developed to serve the fish and fur trades,

to the emergence of communities to support the gold rush, to the growth

of cities supporting the development of the vast agricultural lands of the

west and the developing resources industries of Canada’s far north, Cana-

dian history is in many ways the history of gateways and corridors.

Today, building Canada’s Asia-Pacific Gateway and Corridor is a top prior-

ity. As a small, open economy, dependent on trade, Canada relies on its

transportation system to access critical offshore markets. Our future suc-

cess will be determined in large measure by our ability to move goods and

people reliably and efficiently in global supply chains and routings.

While the U.S. has been Canada’s primary trading partner in the past, and

will continue to be important, rapidly developing economies in China,

India and Southeast Asia represent the greatest opportunities for the

future (see Figure 1-1). Much of the projected growth in global trade will

be generated from this region in the next 20 years. These countries can

generate significant new markets for our products and services, provide

import goods for our citizens and industries, and increase tourism to

Canada.

Situated between Asia and the U.S., our west coast ports and airports, and

their supporting corridors, are also well positioned to capture a portion

of the growing traffic between these major trading partners. Capturing a

larger market share of this gateway traffic would generate significant eco-

nomic benefits for all of Canada. However, Canada will have to compete

aggressively with other gateways and corridors for this traffic.

1.0 INTRODUCTION

IndiaJapan

Korea

Singapore

Taiwan

Canada

United States

Mexico

Figure 1-1: Key Economic Indicators of Select Asia-Pacific Countries

Country Population GDP GDP per Capita GDP Growth

Canada 32.2 $1,132 $35,133 3.0%

United States 296.6 $12,456 $42,000 2.6%

Mexico 105.3 $768 $7,298 2.7%

NAFTA Total 434.1 $14,357 N/A 2.8%

Country Population GDP GDP per Capita GDP Growth

China 1,307.6 $2,234 $1,709 9.4%

Hong Kong SAR 7.0 $178 $25,493 5.3%

India 1,094.3 $772 $705 6.2%

Japan 127.7 $4,567 $35,757 1.7%

Korea 48.3 $788 $16,308 5.2%

Singapore 4.4 $117 $26,836 5.0%

Taiwan 22.8 $346 $15,203 3.6%

Asia Pacific Total 2,611.9 $9,002 N/A 5.3%

On October 11, 2006, the Prime Minister, along with Minister of Inter-

national Trade and the Minister for the Pacific Gateway and the Van-

couver-Whistler Olympics, David Emerson, and Minister of Transport,

Infrastructure and Communities, Lawrence Cannon, announced Canada’s

Asia-Pacific Gateway and Corridor Initiative (APGCI). The mission is to

establish Canada’s Asia-Pacific Gateway and Corridor (APGC) as the best

transportation network facilitating global supply chains between North

America and Asia.

The specific goals of the APGCI are to:

• boost Canada’s commerce with the Asia-Pacific region;

• increase the APGC’s share of North American bound container

imports from Asia; and

• improve the efficiency and reliability of the APGC for Canadian and

North American exports.

The APGC is a network of critical transportation infrastructure including:

• ports in the B.C. Lower Mainland and Prince Rupert;

• principal road and rail connections extending across western Canada

and into the U.S.;

• key border crossings; and

• the Vancouver International Airport and other Western Canadian

airports with service to Asia.

This APGCI is the culmination of many years of work. For two decades,

concerned stakeholders in western Canada have been promoting the

gateway concept as a way of bringing governments, business and public

interests together to look at challenges and opportunities in an integrated

manner (see adjacent table).

Initiatives to Build the Asia-Pacific Gateway and Corridor

1987 Port of Vancouver, Fraser Port, CN, CP Rail, Interna-

tional Longshore and Warehouse Union, B.C. Maritime

Employers Association and Western Economic Diversi-

fication established Roundtable on Transportation

to increase throughput of cargo moving through Lower

Mainland of Vancouver.

Early 1990s The Asia Pacific Foundation created the Asia Pacific

Trade and Transportation Forum to bring foreign

shipping lines and shippers to Canada.

1994 The Greater Vancouver Gateway Council (GVGC)

was established by merging the Roundtable on Trans-

portation and the Asia-Pacific Trade and Transportation

Forum. Several initiatives were undertaken including a

comprehensive Vision in 1999 to build the Gateway.

2001 The GVGC developed a Major Commercial Transpor-

tation System Plan for the Lower Mainland which

identified the need for $7 billion in capital investments

over 20 years.

2005 Government of B.C. developed a British Columbia

Ports Strategy which presents a vision for the port

system in 2020 and strategies to achieve it.

Previous Federal Government introduced Pacific

Gateway Act which included a commitment to provide

additional funding and establish a new advisory

council. (Bill not passed)

2006 Government of B.C. announced a $3 billion Pacific

Gateway Program to build three major infrastructure

projects.

Government of B.C. released a Pacific Gateway Strat-

egy Action Plan in April which identified a number of

specific infrastructure and policy initiatives that must

be pursued.

Government of Canada tabled Budget in May which

included $591 million in funding for new APGCI.

Government of Canada formally announced APGCI in

October.

While there has been some real progress made in recent years improving

and building the APGC, much work remains to be done. Several significant

challenges and strategic decisions remain.

The purpose of this document is to provide additional background on

the APGC, a vision to guide future planning and priority setting, along

with a summary of some of the key strategic issues which will have to be

addressed by the Federal Government and other key stakeholders.



2.1 Economic Growth & Trade

The demand for transportation services is highly dependent upon eco-

nomic activity. The most widely used measure of global economic activity

is GDP, and a strong correlation exists between world GDP, international

trade, and the demand for transportation.

Since the 1980’s, there has been a structural shift in the global economy,

with an increased reliance by nations on international trade as a primary

driver of their economic growth and development (see figure 2-1). As a

result of this shift, world trade volume is now outpacing economic activity.

The value of trade is now growing at around 2.5 times the rate of growth

of the overall world economy. This trend is not expected to change in the

short term.

Figure 2-1: International Trade as a % of World GDP

Source: World Bank.

The figure below highlights global economic performance, worldwide and

for select countries, between 2000 and 2005. As the table illustrates, the

U.S. and Canadian economies performed in line with the world averages.

By comparison, China and India posted the highest GDP growth rates.

Figure 2-2: GDP Growth Rates (% per annum)

Year World U.S. Canada China India2000 4.0 3.7 5.3 8.4 4.0

2001 1.5 0.8 1.8 8.3 5.3

2002 1.9 1.9 3.4 9.1 3.6

2003 2.8 3.1 2.0 10.0 8.3

2004 4.2 4.2 2.9 10.1 8.5

2005 3.6 3.5 2.9 9.9 8.5

Source: World Bank.

The world’s economy is also undergoing other shifts. The relative economic

significance of Western Europe and Japan has declined due to their aging

populations and structural economic issues. In turn, large emerging

markets in other parts of the world, particularly Brazil, Russia, India and

especially China (commonly referred to as the BRIC nations) are driving

growth and shaping future investment, trade, and commerce (see Figure

2-2).

In 2005, for example, China’s exports increased by 27%, while its economy

grew nearly 10%. China’s entry into the World Trade Organization (WTO),

its appetite for resources, and its continuing urbanization all point to

further trade growth.

However, China is only one part of the Asian success story. About 45% of

world trade now takes place in or with Asia. India is also experiencing a

sustained period of relatively high growth, while other economies such as

Indonesia and South Korea continue to grow in importance. For example,

Canadian merchandise exports to South Korea increased by 23% in 2005.

Furthermore, Vietnam is currently constructing a port in Ho Chi Minh City

that will have greater capacity than the Port of Vancouver when it comes

online, and further expansion plans are already in place.

Here in Canada, our recent economic performance has been both healthy

and steady. However, as figure 2-2 illustrates, our economy is relatively

small, ranking only larger than Russia amongst the G8 group of countries.

Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007

$0

$10

$20

$30

$40

$50

1980 1985 1990 1995 2000 2005

GDP

(US$

, tril

lions

)

International Trade Total

58%

54%43%

38%33%

32%

2.0 CANADA IN THE GLOBAL ECONOMY

6

Figure 2-3: Size of Canadian Economy Relative to G8 Countries (2005)

Source: International Monetary Fund, World Economic Outlook, April 2006

Canada’s economy is very open and reliant on trade. In fact, Canada

consistently exports more goods than it imports, resulting in an annual

merchandise trade surplus. Overall, our exports of goods and services

represent over a third of our GDP (38% in 2005). When compared to the

U.S., our economy is more than three times as reliant on exports (see

Figure 2-4).

Figure 2-4: Exports of Goods and Services as a Proportion of GDP (2005)

Source: Department of Foreign Affairs and International Trade, “Seventh Annual Report

on Canada’s State of Trade,” 2006

From a regional perspective, Canada’s exports to Asia-Pacific nations have

increased consistently over the last decade, from $25.2 billion in 1995 to

$26.4 billion in 2005. During this period, exports to China, India and South

Korea rose considerably, while exports to Japan, Taiwan and Hong Kong

declined (see figure 2-5).

Figure 2-5: Canada’s Exports to Select Asia-Pacific Countries (CDN dollars,millions)

Source: Industry Canada

2.2 International Trade

Maritime Trade

The economic activity and trade described above creates demand for

intercontinental goods distribution, and to this extent, shippers only

have two modal choices – sea or air. Maritime transportation is the more

popular of the two modes by volume and is fundamental to international

trade because it represents the most practical and cost effective means of

transporting large volumes of commodities and finished goods. As figure

2-6 illustrates, world maritime trade has grown steadily in the last 15

years and topped 7.2 billion metric tones in 2005.

Figure 2-6: World Maritime Trade

Source: Clarkson Research.

Within the marine transportation sector, a major shift has also taken

place - containerization. Between 1980 and 2005, maritime traffic grew

an annual rate of 2.4%. During this same period, global container traffic

increased an average of 8.6% per annum. This trend is also expected to

continue for the foreseeable future (see figure 2-7).

Germany $2,797

Japan $4,571

Russia $766

UK $2,201

US $13,446

Italy $1,766

Canada $1,130

France $2,106

Billions of dollarsTotal G8 = $28,785

13%10%

26%27% 26%

40%38%

0

0

0

0

0

1

Germany Canada Italy France UK Japan US

Percent of GDP

7.2

5.9

4.94.2

0.0

2.0

4.0

6.0

8.0

1990 1995 2000 2005

Metri

cTon

nes (

billio

ns)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

1995 2005

IndiaTaiwanHong KongSouth KoreaChinaJapanOther



Figure 2-7: Growth of World Maritime Trade

Source: United Nations.

Global container activity can be classified into four main routes. The

traffic distribution amongst these routes is summarized in the figure

below. Transpacific container traffic is the most important driver of global

container trade activity, generating 17% of total trade in 2004. This figure

is projected to increase in the future. As shown in figure 2-8, transpacific

seaborne container trade is subject to significant directional imbalances

(72% eastbound versus 28% westbound)

Figure 2-8: Distribution of World Maritime Trade by Region

Source: Clarkson Research and InterVISTAS.

Air Cargo

Air cargo represents the other part of the intercontinental goods distribu-

tion network. While the primary benefit of maritime transportation is

lower costs, the benefits of air transportation are speed and reliability.

Since 2000, world intercontinental air cargo traffic levels have increased

continuously, reaching 17.7 billion metric tonnes (see Figure 2-9). The only

exception to continuous growth was in 2001 which was

negatively affected by 9/11.

Figure 2-9: World Intercontinental Air Cargo Traffic

Source: MergeGlobal.

The traffic distribution amongst these routes is summarized in the figure

below. Transpacific container traffic is the second most important driver of

intercontinental air cargo activity, generating roughly 18% of total trade

in 2005.

Figure 2-10: World Intercontinental Air Cargo Traffic by Region

Source: MergeGlobal.

2.3 International Travel

Another spin-off of increased global economic activity and trade is passen-

ger air travel. Since 2000, global air passenger traffic has increased from

3,381 billion RPKs to 4,018 billion RPKs. As Figure 2-11 illustrates, air traffic

has now fully recovered from the impacts of September 11.

Estimated World Seaborne Container Trade(million, TEUs)

2004 % 2005 % Est. 2006 %

Transpacific Eastbound 42.2 11.9% 48.1 12.3% 54.8 12.7%Westbound 18.1 5.1% 19.9 5.1% 21.6 5.0%

Far East-Europe Eastbound 27.9 7.9% 31.4 8.0% 35.4 8.2%Westbound 13.0 3.7% 13.8 3.5% 14.7 3.4%

Transatlantic Eastbound 12.1 3.4% 12.1 3.1% 12.9 3.0%Westbound 9.2 2.6% 9.8 2.5% 9.9 2.3%

Other 232.5 65.5% 255.6 65.4% 282.2 65.4%

Total 355.0 100.0% 390.9 100.0% 431.5 100.0%

17 18

15151415

0.0

4.0

8.0

12.0

16.0

20.0

2000 2001 2002 2003 2004 2005

Metri

cTon

nes(

mill

ions)

World Intercontinental Air Cargo Traffic(tonnes, millions)

2005 %

Transpacific 3.2 18.0%

Far East-Europe 3.9 22.0%

Transatlantic 2.4 13.3%

Intra-Asia 3.9 21.7%

Rest of World 4.4 25.0%

Total 17.7 100.0%


0

100

200

300

400

500

600

700

800

1980 1985 1990 1995 2000

Inde

x (19

80 =

100)

Containers

All Maritime Trade

Figure 2-11: Global Air Passenger Traffic

Source: Boeing.

The air passenger traffic distribution by region is summarized in the figure

below. Transpacific is the third most important intercontinental air pas-

senger market, generating over 10% of total global passenger activity in

2005.

Figure 2-12: Distribution of Global Air Passenger Traffic by Region

Source: Boeing.

According to the International Civil Aviation Organization, international

travel as a percentage of total traffic has increased steadily since 1980, and

in 2005 represented 35% of total passenger travel worldwide, compared

to 22% in 1980. This reality underscores the need for efficient processes to

facilitate passenger movements across borders.

3,7544,018

3,3043,2793,2903,381

0

1,000

2,000

3,000

4,000

5,000

2000 2001 2002 2003 2004 2005

Reve

nue P

asse

nger

Kilo

metr

es (b

illion

s)

9Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007

Figure 2-13: International Air Traffic as a Percentage of Total Air Traffic

Source: International Civil Aviation Organization

Since 2005, there has been a major shift in the global markets that gener-

ate tourists (see Figure 2-14). Fifteen years ago, 10 countries generated

70% of total tourism expenditures worldwide. This meant that marketing

organizations could target marketing and sales efforts in only 10 markets

and access 70% of the total market. Today, the top 10 markets account for

only 54% of tourism expenditures. Many emerging countries, like China

and Russia, are generating new sources of travellers and creating opportu-

nities for destinations.

Figure 2-14: Changing Source Markets (International Tourism Expenditures)

Source: World Tourism Organization

World Air Passenger Traffic Traffic (RPKs, billions)

2005 %

Transpacific 240.0 10.3%

Far East-Europe 270.0 11.6%

Transatlantic 390.0 16.7%

Europe-Latin America 150.0 6.4%

Rest of World 1280.0 54.9%

Total 2330.0 100.0%

0

300

600

900

1,200

1,500

1,800

2,100

1980 1985 1990 1995 2000 2005

Total

Tra

ffic (

pass

enge

rs, m

illio

ns)

International Total

35%

32%

29%24%

22%22%

United States, Germany, Japan, United Kingdom,Italy, France, Canada, Austria, Netherlands, Sweden

1990United States, Germany, Japan, United Kingdom,

Italy, France, Canada, Austria, Netherlands, Sweden

Other

Germany, United States, United Kingdom, Japan,France, Italy, Netherlands, Canada, Russia, China

70%56%

Canada3%

Germany, United States, United Kingdom, Japan,France, Italy, Netherlands, Canada, Russia, China

Other

2005

46%

54%

30%Canada4%

2.4 Transportation Trends

In response to these developments, some key trends are emerging in

transportation, both with respect to the movement of goods as well as to

the movement of people. These include:

• Growth in containerization – One of the most important trends

in maritime trade in recent decades has been the growth in contain-

erization. In the U.S., for example, over 18 million TEUs moved in and

out of U.S. container ports in 2001, up 36% from 13 million in 1995.

Going forward, the use of containerization will continue to increase,

even for traditional bulk commodities like grains and forest products.

• Growth in the size of transportation vehicles – Over the past

few decades, another visible trend has been the increase in trans-

portation vehicle size across all modes, including the introduction of

wide-body aircraft, longer trains, heavier trucks, and most remark-

ably, the rapid increase in container vessel sizes.

• Increased importance of logistics and gateways/corridors in

supporting emerging trade and tourism demand – The rise

of the China and India manufacturing economies means that supply

chains are becoming more international in scope. Since most of

today’s supply chain activity flows through key geographic locations

or gateways, the efficient functioning of these trade related regions

will play a key role in supporting emerging growth from the Asia

Pacific region.

• Growth of intermodal transportation – The changing require-

ments of global supply chains has created a renewed focus on

intermodal freight transportation. With the development of contain-

erization in the mid-1900s, the reorientation toward deregulation

near the end of the century, and a new focus on logistics and global

supply chain requirements, the stage appears to be set for continued

intermodal transportation growth.

• Increased use of technology/innovation – The past two

decades have been witness to remarkable advances in informa-

tion, communication, and other technologies. The application of

these technologies has brought considerable change to nearly every

sector of the economy, including transportation. New technologies

are being applied to transportation infrastructure, equipment, and

supply chain management in an effort to make them work smarter

and more efficiently. Examples include the application of ITS, RFID,

etc. This trend shows no sign of slowing down, and in fact, is likely to

accelerate as the public and private sector adjust to new operational

environments.

• Greater consolidation in the transportation sector – The

needs of modern business have spurred the transportation and logis-

tics sector to build truly global networks. This trend has forced many

smaller companies to consolidate and merge into larger entities in

order to compete effectively. The parcel delivery business, where

courier giants such as UPS, FedEx, and DHL have emerged, is a prime

example. Rail, trucking and maritime carriers have also experienced

major mergers. Going forward, the business landscape will continue

to change, and it is projected that mergers and acquisitions will

continue across many transportation sectors.

• Development of strategic alliances – Where consolidation has

not been possible due to limits on foreign ownership, such as in the

airline industry, strategic alliances have been developed to expand

network size, increase efficiency, and improve customer service (e.g.

through-ticketing, baggage transfers, and frequent flyer mileage

credits between alliance partners).


11 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 11 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007

3.1 Existing Gateway and Corridor

Marine SystemBritish Columbia is a maritime province. The main trading ports – the Port

of Vancouver, Fraser River Port, and the Port of Prince Rupert – account

for more than 95% of the international trade moving through B.C.’s port

system. Other ports, such as Squamish, Powell River, Kitimat, and Stewart

also play important roles in Canada’s resource economies (see Figure 3-1).

Port of VancouverThe Port of Vancouver is the country’s largest seaport with annual cargo

movements of over 76 million tonnes valued at roughly $35 billion. It

handles more cargo tonnage than any other port on the west coast of

North America, and connects Canada to more than 90 international trade

partners around the world. The port’s terminals provide container, bulk,

and break-bulk cargo handling, and integrated services for a wide range of

users including cruise operations.

The Vancouver Port Authority is responsible for the port’s assets along 150

kilometres of coastline, including all of the waters of English Bay, Burrard

Inlet and Indian Arm, and the area around Roberts Bank south of the

Fraser River. Port operations include 24 different terminals, most of which

are located on crown-owned lands along Burrard Inlet. The Deltaport and

Westshore Terminals are located at Roberts Bank.

Fraser River PortFraser River Port is the second largest port in Canada by volume, with

annual cargo movements exceeding 38 million tonnes. The port handles

containers, forest products, and steel. Its terminals provide container

and break-bulk handling, and integrated services for the coastal forest

industry.

The Fraser River Port Authority manages 100 kilometres of the main arm

of the Fraser River from Sandheads at the mouth to upstream at Kanaka

Creek and Pitt Lake. Fraser River Port can handle ships with a maximum

draft of 12 meters and an air draft up to 56 meters under the Alex Fraser

Figure 3-1: B.C. Port System

Bridge. Major common user facilities are available at Fraser Surrey Docks,

Annacis Terminals, and Fraser Richmond. Numerous private facilities also

exist within the port, including a major CN railyard and Canadian Pacific

Railway’s RO/RO terminal at Tilbury Island.

Port of Prince RupertThe Port of Prince Rupert is located along the north coast of British Colum-

bia and is closer to Asia than any other port in North America.

The Port of Prince Rupert handles both international and domestic traffic.

In 2005, the port moved just under 4.5 million tonnes of international

cargo. The same year, total cargo reached nearly 9 million tonnes. The

port’s primary commodities include forest products and coal.

The port also served nearly 100,000 cruise passengers in 2005.

Port facilities include three major terminals and two cruise ship terminals.Four smaller terminals are managed by private operators. Rail service to the

port is provided by CN Rail.

Road and Rail SystemAs figure 3-2 illustrates, the APGC’s port facilities are linked to key markets

by well developed road and rail corridors. Specifically:

3.0 CANADA’S ASIAPACIFIC GATEWAY AND CORRIDOR

BRITISH COLUMBIABRITISH COLUMBIA ALBERTAALBERTA

TATESED STAUNITEUNITED STATES

Prince RuperpertperPrince Rupert

KitimatorgePrince GeoG oeoPrince George

VancouverSquamish

PPowellPowellPoPowellRiver

VictoriaNanaimo

Port Alberni

Campbell River

Stewart

Major RoadsBNSF System Network

CN System NetworkCPR System Network

Canada Port Authority PortsOther Significant Ports

LegendNorth Fraser Port Authority Jurisdiction

Fraser Port Authority Jurisdiction

Vancouver Port Authority Jurisdiction

V PoVancouver Area PortsVancouver Area PoVancouver Area PortsNorth Fraser Port Authority JurisdictionFraser Port Authority Jurisdiction

Vancouver Port Authority Jurisdiction

Fraser Port

r PortPortPortNorth Fraser Portth Fraser PortNorth Fraser Port VaVancouver PortVancouver PortVancouver PortVancouver Port

BC Port Traffic

International Exports70-80 million tonnes per year

International Imports10-11 million tonnes per year


Lower Mainland

• The Port of Vancouver and Fraser River Port enjoy good road access

to key markets via the Trans-Canada Highway and the U.S. Interstate

Highway System (with interconnecting service provided by major

trucking lines).

• Locally, the facilities of both ports are connected to each other via a

well-developed regional road network.

• Vancouver is the only west coast port with service by three major

transcontinental railways – Canadian National Railway Company

(CN), Canadian Pacific Railway (CP), and Burlington Northern Santa Fe

Railway (BNSF). Excellent rail connections are available at both the

Port of Vancouver and Fraser River Port. These port facilities are also

served by a short line railway - Southern Railway of British Columbia.

Prince Rupert

The Port of Prince Rupert is served by CN’s high capacity northern mainline

and the Trans-Canada Yellowhead Highway, which provide strong land

connections to the rest of North America via the lowest grades through the

Rocky Mountains. Port facilities feed directly into the Northwest Transpor-

tation Corridor, a modern road and rail network engineered and built to

carry large volumes of traffic.

Airport SystemThe Gateway’s ports, roads, and railways are complemented by the west-

ern Canadian airport system.

Vancouver International Airport

The Gateway’s primary aviation facility is the Vancouver International

Airport (YVR). YVR is Canada’s second busiest airport, with 16.4 million

passengers, approximately 224,000 tonnes of cargo, and 280,000 take-offs

and landings in 2005. YVR is the second largest international passenger

gateway on the west coast of North America and offers over 500 non-stop

flights and 142,000 seats monthly to destinations in Asia.

Other Airports

The Calgary International Airport is linked to Asia-Pacific via freighter

service, while Toronto Pearson International Airport is linked by non-stop

passenger services. (It should be noted that the latter is not considered a

part of the APGCI).

Transportation Services

Canada’s Gateway system is highly dependent upon several service part-

ners. These include:Figure 3-2: Pacific Gateway Rail and National Highway

System

Major RoadsBNSF System Network

CN System NetworkCPR System Network

Legend


• Government agencies – customs and border services, agricultural

inspection services, security services, etc.

• Airport and port authorities in Vancouver, Prince Rupert, plus at criti-

cal inland facilities along the major transportation corridors at Prince

George, Kamloops and Cranbrook.

• Private terminal operators – own and operate port terminals for

passengers and cargo.

• Railways – major carriers include CN, CP, and BNSF. CN and CP are

federally regulated (as are BNSF operations in Canada) and all three

carriers have extensive transcontinental networks that link ports to

inland markets.

• Airlines – the Vancouver International Airport’s network includes

intercontinental service (by Air Canada, several foreign air carriers,

and numerous charter operators), continental connections (by Air

Canada, WestJet and many U.S. carriers), and regional services (by

Jazz and others).

• Shipping and cruise lines.

• Other carriers - truck and tugboat operators, shortline rail carriers.

• Labour (union, non-union) – longshore, railway, trucking, airline,

inspection agencies, etc.

• Local governments - provide and maintain local roads and other

community services and regulate use of municipal lands.

• B.C. provincial government - has regulatory control over land use

(except federal lands) and owns the majority of riverbeds and port

sea beds (the one exception to this is the Port of Vancouver). The

provincial government also have responsibility for highway infra-

structure.

• Other western provinces - APGC is a strategic asset for the flow of

western provincial exports.

• Translink – the Greater Vancouver Transportation Authority has

responsibility for funding certain road and bridge infrastructure in

the busy Vancouver port/airport region, and for parts of the Canada

Line transit system linking the airport to the port and the central

business districts and tourism attractions of Vancouver and Rich-

mond.

• Private sector operators – of warehousing, vehicle and vessel repair,

trade exhibition and business facilities, etc.

3.2 Potential Opportunities for the Asia-Pacific Gateway and Corridor

As we look to the future, Canada’s Asia-Pacific Gateway and Corridor has a

significant opportunity to expand its role in global supply chains and the

rapidly evolving Asia-Pacific trade corridor. That said, the question that

often arises is “Why us?”

Simply put, Canada’s Asia-Pacific Gateway and Corridor strategically links

the Asia-Pacific region to North America via the shortest sea, land, and air

routings (see figure 3-3). The ports of western Canada are one to two days

closer sailing time to Asia-Pacific ports than their competitors in the U.S.,

and our airports are several hours closer flying time than similar facilities

south of the border. This puts shippers closer to their intended markets, be

it in Asia or North America, and enables transportation service providers to

turn their vehicles (ships/airplanes) around faster and realize benefits from

faster transit times between Asia-Pacific and North American markets.

For example, sea journeys between Shanghai and North America are:

• 68 hours faster through Prince Rupert than through Los Angeles; and

• 32 hours faster through Vancouver than through Los Angeles.

The combination of western Canada’s geographic advantage, the country’s

well-developed transportation network, existing infrastructure capac-

ity, and planned new facilities leaves Canada’s Asia-Pacific Gateway and

Corridor well positioned to pursue several potential opportunities. These

include:

Figure 3-3: Geographic Advantage of Pacific Gateway

Prince RupertVancouver

Los Angeles

Shanghai

Manzanillo


391.0

762.0

0

250

500

750

1,000

2005 2015

Global Container Traffic(TEUs, millions)

68.0

136.0

0

50

100

150

200

2005 2015

Transpacific Container Traffic(TEUs, millions)

17.7

34.0

0

10

20

30

40

2005 2015

Global Air Cargo Traffic(tonnes, millions)

3.2

6.8

0

2

4

6

8

10

2005 2015

Transpacific Air Cargo Traffic(tonnes, millions)

4,018.0

6,659.2

0

2,000

4,000

6,000

8,000

2005 2015

Global Air Passenger Traffic(RPKs, billions)

240.0

750.0

0

250

500

750

1,000

2005 2015

Transpacific Air Passenger Traffic(RPKs, billions)

Figure 3-4: Transpacific Container Markets

Figure 3-5: Transpacific Air Cargo Markets

Figure 3-6: Transpacific Air Passenger Traffic

• Increasing our participation in transpacific air cargo trade

(includes imports and exports between Asia-Pacific and North

America) – Global air cargo traffic is projected to nearly double

between 2005 and 2015. During this period, transpacific cargo traffic

is projected to increase by over 110% from 3.2 million tonnes to 6.8

million tonnes (see figure 3-5). At present, Canada captures a modest

share of this traffic. Through the introduction of appropriate strate-

gies, an opportunity exists for Canada to participate more aggres-

sively in this market.

• Increasing Canada’s participation in transpacific container

trade (includes imports and exports between Asia-Pacific and North

America) – Worldwide container traffic is projected to nearly double

between 2005 and 2015. During this period, transpacific container

movements are projected to increase by 100% from 68 million

TEUs to 136 million TEUs (see figure 3-4). Canada presently captures

roughly 9% of this market. With proactive action, it is possible that

Canada could capture a significantly larger share of this market.

• Increasing our participation in the transpacific air passenger

market (includes inbound and outbound between Asia-Pacific and

North America) – Global air passenger traffic is projected to grow

by roughly 65% between 2005 and 2015. During this timeframe,

Transpacific passenger traffic is projected to increase by over 300%

from 240 million RPKs to 750 million RPKs (see figure 3-6). Similar

to air cargo, Canada’s share of this traffic is fairly modest. Through

the introduction of appropriate strategies, an opportunity exists for

Canada to capture a larger share of this market.


• Developing value-added processing – With increased volumes

of both maritime container cargo and air freight, an opportunity

exists to establish value-added processing centres in western Canada.

Goods moving through the Gateway could potentially be stored for

distribution or undergo some form of processing to add value such

as customization of personal computers or affixing customer logos to

sports apparel. All activities would be free of GST and duties prior to

onward shipment to the U.S. under the export distribution program.

This is considered a high growth opportunity.

While geography leaves Canada well positioned to exploit these opportu-

nities, it must be emphasized that location alone will not be sufficient to

ensure success of the APGC. Canada’s natural advantage can be under-

mined by issues related to reliability (e.g. trans-shipping times, border

clearance delays, congested corridors) and by high costs.

3.3 Gateway and Corridor Vision

Western Canada has been blessed by geography, giving its ports and

airports a strategic competitive advantage as the closest North American

points of entry by sea and air.

Canada’s connection to the Pacific region can be traced back to the late

1700’s when the first sea-otter pelts from the west coast were conveyed

across the Pacific to China to be traded. With the extension of the Cana-

dian Pacific Railway to Vancouver in 1887, Canada’s trade with the nations

of East Asia and other countries of the Pacific Rim expanded dramati-

cally. The Port of Prince Rupert was first established at the terminus of

the Grand Trunk Railway in the early 1900s as part of a vision to develop

a North Pacific gateway and corridor for Canadian exports. In 1931, the

Vancouver International Airport officially opened and was hailed as the

gateway to the Pacific.

Vancouver has served as Canada’s largest Pacific Gateway for over 100

years. As we further develop Canada’s Pacific Gateway and Corridor, it is

essential that we lay the foundation for a future transportation network

that will take Canada through to the next century. This means not only

addressing the important infrastructure and capacity needs for the next

20 years, but also ensuring that land use planning and protection for the

Asia-Pacific Gateway and Corridor does not preclude its ability to respond

to the long term opportunities of what is now becoming known as the

Pacific Century.

Therefore, the vision for the Asia-Pacific Gateway and Corridor Initiative

needs to be anchored on a grander scale, both in terms of scope and plan-

ning horizon. The APGC vision also needs to capture the strategic objective

of making Canada’s Asia-Pacific Gateway and Corridor a magnet for

attracting a greater share of trade and travel across the Pacific. To succeed

as the preferred transportation network over the long term, the Asia-

Pacific Gateway and Corridor needs to capitalize on its strategic geographic

location and provide a complete package that includes not only phased

expansion of capacity to handle future growth, but also a transportation

system that is efficient, reliable, secure and cost competitive.

The proposed vision for the Asia-Pacific Gateway and Corridor is intended

to capture all of these elements:

Canada’s Asia-Pacific Gateway and Corridor will be the preferred transportation network for connecting a significant share of the transpacific flow of global commerce between the growing markets of Asia and North America, well into the 21st century.

Figure 3-7: Canada’s Asia-Pacific Gateway and Corridor

3.4 Economic Significance of the Gateway and Corridor

The Gateway is a major source of economic activity in British Columbia. It

generates over 75,000 direct jobs and roughly $4.6 billion in GDP economic

activity. A breakdown by mode is provided in the table below.

Figure 3-8: Gateway System Statistics – Transport Activity

Maritime Air Truck Rail Total

Direct Jobs 33,527 23,385 14,214 4,064 75,190

GDP (B$/yr) 1.9 1.5 0.9 0.3 4.6EconomicOutput ($B/yr) 5.4 2.4 1.9 0.7 10.4

Source: Economic Impact Analysis of the Major Commercial Transportation System,

Delcan/Economic Research Group, July 2003


The impact of the APGC stretches well beyond its direct activities. The

economic health of the municipalities surrounding these facilities stems, in

large part, from the employment of people engaged in related port/air-

port activities. As well, these facilities have direct impacts beyond the

Lower Mainland, with employment supporting the Gateway’s corridors

and the export sector extending throughout the prairies and even further

afield. A 2001 study by the Vancouver Port Authority found that almost

40% of the port’s direct jobs were outside of the Lower Mainland.

The gateway system also support several key sectors such as forestry,

mining, agriculture, manufacturing, and tourism that account for a signifi-

cant portion of the provincial economy and a majority of B.C.’s exports.

3.5 Performance Targets and Measuring Success

The APGCI constitutes a significant investment of public and private funds,

as well as dedication of human capital. The Results-based Management

and Accountability Framework of the Federal Government requires that

strategic outcomes be defined, performance measures be determined,

and a sound performance measurement strategy be developed that allows

progress to be tracked, with outcomes measured and reported. Here,

some potential performance measures are suggested for the APGCI. Addi-

tional, or alternative measures, should be determined by APGC program

managers in conjunction with information management specialists and

Treasury Board Secretariat analysts. Consideration must also be given to

the interdependencies that may exist across the performance measures.

Target 1: Boost Canada’s commerce with the Asia-Pacific region, as measured by:Measure 1a: Canada’s Asia-Pacific import trade volume.

Measure 1b: Canada’s Asia-Pacific export trade volume.

Measure 1c: Canada’s Asia-Pacific tourism receipts.

These measures focus on trade and commerce with Asia, rather than traffic

or market share (Targets 2 and 3, respectively).

Potential metrics include data that is already collected by the Federal

Government, such as the value of imports and exports between Asia-

Pacific nations and Canada as well as tourism expenditures in Canada by

Asia-Pacific source economies.

One issue that needs to be addressed is the timeliness of data availability.

In particular, data on tourism expenditures in Canada is characterized

by lengthy delays. A review of the type and timelines of data currently

collected is necessary to ensure that Canada has the data available to

measure progress in this and other areas.

Target 2: Increase Canada’s traffic volumes to/from the Asia-Pacific region measured by:

Measure 2a: Canada’s Asia-Pacific two-way sea container traffic flow.

Measure 2b: Canada’s Asia-Pacific two-way air passenger traffic flow.

Measure 2c: Canada’s Asia-Pacific two-way air cargo traffic flow.

These measures focus on increasing Canada’s traffic volumes with Asia.

Over the coming decade and a half, the APGC is poised to facilitate the

expansion of Canada’s sea container, air passenger, and air cargo traffic

to and from the Asia-Pacific region. Canada’s airports and air navigation

infrastructure providers are making the needed investments in capacity.

Canada’s ports and railways are also investing in capacity and operational

efficiencies. Canada’s airlines are vigorously pursuing the development of

new routes and frequencies. The Government of Canada is committed to

improving the competitiveness of Canada’s airports by increasing oppor-

tunities for air access by pursuing open skies agreements to stimulate new

travel and trade opportunities. Provincial governments are making road

infrastructure investments to support the APGC, and the tourism industry

is marketing Canada as a destination for leisure, conventions, trade exhibi-

tions, education, and other activities.

While the primary objective is increased traffic, other measures should also

include relative performance in the number of destinations and service

frequencies.

Potential metrics include data that is already collected by the Federal

Government, such as origin/destination sea container, air passenger, and

air cargo volumes. Data timeliness and comprehensiveness will continue

to pose challenges, however. For example, air cargo data is collected by

Statistics Canada but the data as collected does not show true origin and

destination of the goods.

Target 3: Increase the APGC’s share of North America bound traffic from Asia, as measured by:Measure 3a: Canada’s APGC share of Asia-NAFTA sea container traffic.

Measure 3b: Canada’s APGC share of Asia-NAFTA air passenger traffic.

Measure 3c: Canada’s APGC share of Asia-NAFTA air cargo traffic

British Columbia has set a target to raise its market share of Asia-NAFTA

sea container traffic from 9% to 17% by 2020. This target represents an

increase from an annual volume of two million TEUs to an estimated nine

million TEUs. While this may or may not be the final target set for the

APGC, it offers a starting point for consideration. The measurement of this

goal would include the combined activity of the three ports in Vancouver

and the Port of Prince Rupert. In measuring achievement of this goal, no

differentiation would be made among the ports. Federal investments will

be made where they provide the greatest benefit for Canada, and it is the

collective achievement of Canada’s ports which is the measure of success.

TEU volumes are tracked by the four APGC ports. U.S. west coast ports also

track TEUs, although the measure of market share is complicated by the


fact that some Asia-Pacific container traffic is routed via U.S. Gulf of Mexico

state ports as well as eastern U.S. ports. This data is not readily accessible

and Transport Canada should work with industry and the U.S. government

to collect and exchange this data.

Other measures should include the APGC’s market share of Asia-NAFTA air

passengers and air cargo.

Target 4: Improve the efficiency and reliability of the APGC for Canadian and North American exports, as measured by:

Measure 4a: Delivery reliability from the APGC to both Central Canada and the U.S. Midwest.

Gateway competitiveness depends on high performance logistics systems.

In the field of supply chain management, one of the most important per-

formance measures is delivery reliability. Logistics reliability facilitates the

reduction of inventories across the supply chain (including retail outlets,

distributors, in-transit inventories and source of supply inventories), which

in turn, reduces costs for producers and consumers. The achievement of

high reliability is a goal for both surface transportation modes (road and

rail) as well as the air mode.

Developing measures of supply chain reliability can be a challenging task.

The types of statistics usually collected for transportation and port/airport

systems are typically focused on traffic and operational measures. New

measures will have to be developed, and new statistical data collection

and reporting will need to be put in place. This will need to be a co-opera-

tive effort with the transportation and logistics industry.

It will not be sufficient to simply measure Canada’s performance, as suc-

cess depends on relative performance. Hence, measures will necessarily

have to include measurement of gateway and corridor competitors.

One possibility would be to task the Centre for Transportation Studies at

the University of British Columbia (UBC) with the development of these

measures, as a co-operative effort with the Van Horne Institute at the

University of Calgary, the University of Manitoba Transportation Institute

(UMTI), the Western Transportation Advisory Council (Westac) and Statis-

tics Canada, with the latter assuming responsibility for reporting. UBC has

been the home of transportation and logistics expertise and research since

1926. It is the home of Canada’s Centre of Excellence for Intelligent Trans-

portation Systems. The Van Horne Institute at the University of Calgary

has been a leader for two decades in the development of transportation

policy across all modes. Meanwhile, UMTI has been a leader in corridor

transportation development and has specialized in the logistics of several

Canadian export industries. Finally, Westac has been a model for three

decades in facilitating dialogue between industry, government and labour

in the transportation sector.

Measure 4b: Shipment transportation times through the Lower Mainland and Prince Rupert.

One of the key nodes of the Asia-Pacific Gateway and Corridor is the

combined operations of the Ports in Vancouver and on the Fraser River.

These vital facilities must share regional highways, bridges and rail

infrastructure with commuters and other users in the B.C. Lower Mainland.

Gateway competitiveness will be impeded by (and potentially contribute

to) regional congestion. The Government of British Columbia has made a

major commitment in its Pacific Gateway Strategy Action Plan to improve

and expand key links from the ports and the Vancouver International

Airport to the corridor from Vancouver, including new highway linkages,

road capacity and bridges. Several elements of the Action Plan are being

developed as public-private-partnerships (P3s) to increase the scope of

investment and reduce the time to delivery of the needed capacity.

Success with Lower Mainland transportation times should be measured

for key corridor routes from the various port (and airport) locations. It is

recommended that Transport Canada work with the Greater Vancouver

Transportation Authority (Translink) in the development and publication

of these measures.

Measure 4c: Work stoppages.

Work stoppages have a significant negative impact on the APGC, not only

in the short run as traffic is diverted to competing ports, but in the long

term as well, since reliability is critical for gateways to attract and retain

customers. This measure is not limited to the ports themselves; labour

disruptions at railways or trucking firms, by border/security officers or by

any other component of the supply chain would have an impact. The ideal

target for this would be zero work stoppages. Measures could include

labour days lost or hours of closure. More sophisticated measures that

deal with “work to rule” incidences should also be developed.


In order to realize the vision and achieve the targets identified in the

preceeding section, critical progress must be achieved in several core and

inter-related areas (see figure 4-1), including:

• Gateway and Corridor Capacity – In developing an integrated

long-term plan for APGC infrastructure, improvements must be made

to address emerging bottlenecks and multi-modal transfer points,

and cement the reputation of the APGC as a reliable, efficient and

secure connection between North America and Asia.

• Effective Governance and Coordination – New approaches to

governance, reflecting an outward-looking perspective on global

commerce, will be required to ensure maximum efficiency of the

APGC’s existing assets.

• Security and Border Efficiency – Canada already has some of the

world’s safest and most secure transportation systems and border

programs, however, the security and border environment is not

static, and constant improvement is imperative.

• Human Resources – A well-trained and reliable workforce will be

essential for the efficient operation and growth of the APGC. Due

to existing market conditions, several challenges will need to be

addressed to ensure a reliable supply of labour.

• Pro-Competitive Policy Framework – Since goods and people

can move between Asia-Pacific and the U.S. via several alternative

gateways, policies and regulations will be required across all levels

of governments and departments that ensure the efficiency and

competitiveness of the APGC.

Figure 4-1: Core Elements of APGCI Strategy

4.1 Gateway and Corridor Capacity

Issues and ChallengesAt the present time, much of the port and rail systems within the APGC are

at or nearing capacity. A comprehensive capacity and demand analysis

was completed in 2005 as part of the B.C. Ports Strategy. At the end of

2005, total container terminal capacity stood at 2.26 million TEUs (twenty-

foot equivalent units); actual container volume was 2.14 million TEUs. Sev-

eral container terminal projects in the Lower Mainland and Prince Rupert

are currently under construction and/or in the planning stage. Any delay

or cancellation of these projects could create a significant capacity shortfall,

severely restricting Canada’s ability to capitalize on growth opportunities.

Rail capacity is also a major issue. Broad estimates of capacity utiliza-

tion (train movements) on key rail corridors show that system capacity

constraints presently exist along the Canadian Pacific Railway’s Nepa to

Revelstoke route east of Kamloops and Canadian National Railway’s main-

line north of Kamloops. Rail networks throughout the Lower Mainland are

also nearing capacity.

4.0 STRATEGIC ISSUES AND CHALLENGES

Optimizing and ExpandingGatewayCorridorCapacity

Fostering a Market-Driven

and Pro-Competitive

PolicyFramework

EnhancingHuman

Resources and CollectiveBargaining

PromotingEffective

CorporateGovernance

EstablishingSecure and SeamlessBorders


Road capacity in the Lower Mainland is another major impediment. Major

truck routes serving the Lower Mainland ports, including Highway 1, High-

way 99, Knight Street and River Road, are at or above capacity and traffic

congestion is consistently identified as one of the major regional issues.

This congestion impacts not only local residents, but also the smooth flow

of APGC traffic.

Going forward, a key challenge for Canada will be to ensure it has suf-

ficient capacity to accommodate the anticipated long term future traffic

growth. Investment and close collaboration will be required by both the

public and private sectors.

To address this issue, the Government of Canada and its transportation

partners will need to:

• Maximize efficiency and capacity of the existing system;

• Facilitate new investment in infrastructure; and

• Plan more effectively for the future and preserve land and right of

ways for future requirements.

Recent DevelopmentsThere have been several positive developments in recent years to improve

the efficiency and capacity of the APGC, including funding commitments

of over $6.2 billion for infrastructure in B.C., Alberta, and Saskatchewan.

• The Federal Government committed $591 million in the May, 2006

Budget for investment in strategic pan-western infrastructure for

the APGC, including: $321 in immediate commitments (upgrading

Pitt River Bridge and Mary Hill interchange, Roberts Bank Railway

Corridor overpasses and underpasses, Twinning of the Trans Canada

Highway in Banff National Park, South Fraser Perimeter Road, and

dredging along the Fraser River). The March 19, 2007 Federal Budget

increased the Federal Government’s committment to the APGC to $1

billion.

• The Government of B.C. announced a $3 billion Gateway Program

in January, 2006 that will support both local residents and APGC

traffic (this includes Federal Government contributions of up to $192

million). Key Program components include twinning of the Port

Mann Bridge, a new South Fraser Perimeter Road and North Fraser

Perimeter Road, and a new Pitt River Bridge.

• Improvements are also being made by the government of B.C. to the

Kicking Horse Canyon, a major connection/link between B.C. and

Alberta.

• CN and CP plan to invest $1.2 billion in rail infrastructure between

2004 and 2010. These funds will be used to improve infrastructure

in B.C., Alberta and Saskatchewan (Northern and Southern Rail

Corridor upgrading). These railways have also entered into several

co-production agreements which have resulted in improved flows

and efficiency during the past several years.

• The Vancouver Port Authority has recently completed several capac-

ity expansion projects at Vanterm and Centerm, an environmental

review has just been completed for Deltaport’s third berth project, a

new Terminal 2 is being proposed for Roberts Bank, and the possibil-

ity of converting Lynnterm from break-bulk to container operation is

being assessed.

• The first phase of Prince Rupert’s Fairview container terminal will

open at the end of 2007.

• Efforts are underway by the Lower Mainland Trucking Forum to

improve the efficiency of the current system, including considering

expanding operations to a 24 hour basis.

• The Vancouver International Airport Authority has commenced

a 10-year $1.4 billion capital program to expand its international

passenger terminal building, along with other improvements. A new

Canada Line Rapid Transit project, funded jointly with the Federal

and B.C. Governments and TransLink, is also under construction.

It should be noted that Canada is not alone in this endeavour. Other coun-

tries like the U.S. and Mexico are also investing heavily in their gateways

and corridors.

Key Questions and Strategic Choices

Expanding Capacity

As previously noted, port terminals and facilities face several capacity

challenges. With so many alternative uses for waterfront land, it is also

difficult to prevent such land which may be required for future expansions

from being developed for other uses. Several new initiatives have been

raised as options to improve freight throughput and capacity and reduce

congestion in and around ports.

• Inland Terminals - Inland container terminals are cargo-transfer

facilities built away from existing marine infrastructure that can be

used as inter-modal transfer points for the shipment of both inbound

and outbound goods. The experience in other jurisdictions is that

large volumes of traffic are required to warrant the double handling

of containers but there are also opportunities to introduce a broad

range of value-added services (e.g. Foreign Trade Zones) and cost

efficiencies.

The Federal and B.C. Governments have been working with industry

to complete a feasibility study to determine location characteris-

tics and identify critical success factors required for efficient and

cost-effective inland container terminals. These terminals could be

built anywhere along the Western Canada corridor at locations with

established intermodal linkages.


• Shortsea Shipping - Shortsea shipping involves the local move-

ment of goods and passengers by water transport. With many

potential water routes, some believe that this strategy could provide

significant additional capacity. From an environmental perspective,

shortsea shipping could also reduce road traffic congestion, improve

air quality, and mitigate noise pollution.

Several companies currently provide shortsea shipping services along

the B.C. coast and the Fraser River, primarily transporting logs, wood

chips, gravel and crushed stone. Some believe that marine contain-

ers could be moved from the deep-water terminals to less expensive

and congested off-dock locations by shortsea shipping. This could

simplify the movement and storage of empty containers and reduce

congestion on the road network. There are some major limitations

however, relative to other shortsea shipping routes in other parts of

the country (Great Lakes, the Saint Lawrence Seaway, and Atlantic

region) where there are greater traffic densities and potentially

longer distances.

Going forward, the Federal Government will be faced with a list of projects

which will exceed its fiscal capabilities. There have been several simula-

tions which have considered modal improvements (e.g. a recent trucking

study examined improvements to the road system). However, there has

not been any comprehensive network analysis to consider the relative

impacts of pursuing alternative strategies. This information is critical to

establishing new transportation priorities, both modally (road, rail, etc.) as

well as regionally (Lower Mainland versus Prince Rupert).

The Government of Canada should consider developing a

comprehensive simulation program to determine the relative

impacts of different infrastructure investments and strategies

in the APGC.

Operational Efficiencies & Innovation

Gateway capacity can also be expanded by increasing operational efficien-

cies. The Port of Vancouver has realized throughput increases as a result

of its capacity to handle larger vessels and berth window corridor system.

However, other capacity-enhancing mechanisms are being introduced at

ports elsewhere in the world that could have application at APGC facilities.

These include increased automation, 24/7 operations (terminal and truck-

ing) and improved and/or more flexible labour practices.

Innovation is also crucial to maximizing efficiency and expanding capacity

of current facilities. Intelligent Transportation Systems (ITS) are a promis-

ing new field of communication and information technology which can be

used to improve throughput and avoid congestion.

A Bureau of ITS and Freight Security was established at UBC in 2005. The

Federal Government has contributed $2 million for a traffic management

centre in the Lower Mainland to implement such a system, with a specific

view to improve the international and inter-provincial flow of goods.

24 hour operations have been identified as a solution which could maxi-

mize the capacity of our ports and terminals. A Lower Mainland Trucking

Forum has been established to pursue this objective. However, one major

issue remains unresolved: since most of the delivery points are not open

24 hours, truckers leaving the terminals must wait until morning to unload

their cargo. As a result , while there are clear benefits for terminals, there

may not be corresponding benefits for truckers.

The Government of Canada should consider continuing to

promote innovative processes to expand capacity and efficiency

of the APGC, including working with industry to implement 24

hour operation.

Infrastructure Investment

The Federal Government has committed significant amounts of fund-

ing during the past few years to gateway infrastructure projects. Many

communities, aware of this funding support, are now lining up to seek

funding for other infrastructure initiatives they claim to be gateway-

related projects. In response, the Government of Canada has identified the

following criteria that must be met in order to qualify for APGCI funding

(see figure below). While this represents a comprehensive list, the federal

government should consider adding a criteria to explicitly include projects

that improve the processing of goods and passengers at border points.

Source: APGCI T.I.F. Application Guide.

APGC Infrastructure Funding Selection Criteria

• The project responds to a demonstrated (qualitative and quan-

titatively) need to address capacity constraints and bottlenecks

in support of Asia-Pacific international trade flows;

• The project has demonstrated benefits, such as economic/social

impacts, congestion reduction and a greater than one benefit-

cost ratio;

• The project improves safety, security and reliability;

• The project fosters local support for important transportation

corridors/infrastructure;

• The project promotes sustainable transportation principles by

reducing environmental impacts including criteria air contami-

nant emissions and greenhouse gas emissions; and

• The project leverages public and private funding, where appro-

priate, including alternative financing mechanisms.

21Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007

Other jurisdictions utilize different approaches to promote significant

capital investments in their transportation systems. In the U.S., funding is

made available through dedicated mechanisms to provide a steady stream

of investments. Tax-exempt bond financing is also available to stimulate

investment by other partners.

The Government of Canada should consider adding a selection

criteria that explicitly includes projects that improve the

processing of goods and passengers at border points.

The Government of Canada should continue to consider

developing new financing mechanisms to fund infrastructure.

Environmental Reviews

Currently, environmental review processes are a serious impediment to

the development of the APGC, both with respect to uncertainty and cost.

Some projects require both federal and provincial approvals, each utilizing

a different process. Approval processes need to be streamlined, harmo-

nized and consolidated.

Some processes include a time limit for a decision, which significantly

helps in the planning process. Timely approvals for critical transportation

projects are critical to the APGC’s ability to handle the projected volumes.

The Government of Canada should consider working with

provincial governments to develop a harmonized accelerated

impact assessment mechanism for high-priority gateway

projects.

4.2 Effective Governance & Coordination

Issues and ChallengesAn effective and efficient Asia-Pacific Gateway and Corridor requires co-

ordination among numerous stakeholders. If the Gateway is to optimize it

operations and enhance its competitiveness, a means must be established

to align disparate interests, policies, and approaches between:

• All levels of governments;

• The public and private sectors;

• Competing modes;

• Competitors within modes; and

• Between Canada and the U.S.

Recent DevelopmentsDuring the last 15 years, Canada has been a leader in the development

of new governance structures for airports, ports, air navigation services

and the St. Lawrence Seaway. However, going forward, new governance

models may need to be adopted to better respond to global competitive-

ness. Key issues include the potential for different ports and/or corridors

to duplicate investments, the ability to finance needed investments, the

overall competitiveness of Canada’s supply chain, and marketing effective-

ness.

Canada developed its governance structure for infrastructure and

transportation service providers at a time when few other nations had

moved away from government operation of transportation facilities and

carriers. At the time, Canada acted as an exemplar to many other nations.

Since Canada’s initial policies, new business models have emerged in the

infrastructure sector. The UK and Australia have fully privatised their ports

and airports. The Netherlands is using state owned corporations for its key

infrastructure facilities. France has partially privatised Aéroports de Paris

as a means of raising capital through equity markets.


Land Use Planning

A critical issue for the long-term vision and development of the APGC is

land use planning. Adequate land and rights of way must be identified

and protected for future development. At the present time, although

Official Community Plans in B.C. identify rights of way, there is no formal

mechanism to prevent these corridors from being used for other purposes.

In B.C., land can be designated as an “Agricultural Land Reserve” which is a

provincial zone where agriculture is recognized as the priority use. Farm-

ing is encouraged and non-agricultural uses are controlled. The ALR covers

approximately 4.7 million hectares in B.C., effectively preserving them for

farming. This innovative policy has protected a significant amount of land

for future agricultural production, helping to ensure the sustainability of

the region.


provincial governments to establish “Transportation Land

Reserves” to protect critical gateway land and rights of way for

future development.

Effective Governance

Canada has successfully privatised its nationally owned air and rail carriers.

While Canada has transferred its major ports and airports to not-for-profit

authorities, many other nations have fully privatised to finance infrastruc-

ture and improve access to equity capital. Some Canadian airports have

suggested privatization would be the logical next step in the evolution of

our system.

While Canada’s airport and port authorities have made major investments

in needed capacity, airlines and other users have raised concerns with

governance, transparency and the level of charges. Some believe

users and gateway competitiveness would be enhanced with a new

governance structure, such as for-profit private operation, with legislated

regulation of fees and charges to provide greater accountability and

transparency.

P3 models have been used for major Canadian transportation investments

such as the Confederation Bridge between New Brunswick and PEI, the

407 Highway bypass around Toronto, and the Canada Line transit system

linking Vancouver International Airport to Vancouver and Richmond.

These business models provide access to private equity for financing

needed infrastructure while retaining important policy

direction for government.

The Government of Canada should undertake a global review

of best practices in governance structures to determine if

further changes are required to port, airport and related

transportation entities to enhance the competitiveness of the

APGC.

The Government of Canada should consider pilot projects for

APGC facilities which would increase the role of the private

sector and investors in the delivery of infrastructure and

services.

Lower Mainland Port Integration

On July 7, 2006, the Vancouver Port Authority (VPA), Fraser River Port

Authority (FPA) and the North Fraser Port Authority (NFPA) agreed with

the Federal Government to explore the opportunities for a new integrated

port entity for the lower mainland.

Phase One of this initiative was to determine the business case for

integration and to recommend an organizational model. Key findings and

recommendations included:

• There is strong support for integrating the three Lower Mainland

port authorities. Several major benefits are anticipated, including

improved land use planning, improved efficiency and more effective

marketing.

• The three Authorities should be amalgamated into one new Port

Authority, established through Supplementary Letters Patent.


• A Transition Committee (made up of directors and CEO’s of the three

port authorities along with a representative of the Federal Govern-

ment) should be established to develop and implement a transition

plan.

The phase was completed and approved by the boards of all three authori-

ties in November. Specific recommendations were made on a number of

issues believed to be critical in permitting the new entity to achieve its

vision – to become a Global Competitor, Community Partner.

A Transition Committee has subsequently been established and work is

now underway in developing the Transition Plan.

The Government of Canada should continue to work with the

three Lower Mainland Port Authorities to amalgamate

them in 2007.

Cooperation and Support

To help control congestion, municipalities may impose various measures,

such as sales taxes and tolls, which also generate revenue. However, the

development of the Pacific Gateway and Corridor presents a particular

challenge for municipalities, which have property taxes as their chief

source of revenue. While they benefit from revenues as a result of pay-

ments in lieu of taxes from airports and ports, and property taxes of ten-

ants, it does not come without some costs – traffic congestion, potential

for reduced quality of life in some neighbourhoods, road maintenance and

investing in road-rail grade separations, services such as water, sewer, and

policing, and land that may be underperforming in terms of tax revenues.

A major issue with the current financial arrangement is that, as traffic

increases, municipalities do not benefit from increased revenues to offset

their increased expenses.

Failure to balance these costs and benefits forces municipalities to increase

property taxes, and consider converting industrial land to more profitable

uses. Resolving the sharing of these costs could significantly reduce local

opposition to gateway and corridor projects in the national interest.

The Government of Canada should consider working with the

Province of B.C. and municipalities to consider changing the

current property tax structure for gateway facilities from a PILT

model to one based on throughput.

4.3 Security & Border Efficiency

Issues and ChallengesAs discussed in Chapter 3, Canada’s geographic proximity to Asia is a key

strategic advantage for the Gateway and Corridor. The flow of goods and

people across the Pacific depends, however, on good security and border

processes. Failure to do so could result in the so-called thickening of the

border (see figure 4-2) or worst yet, consequences from security incidents.


Gateway efficiency is impeded by the need for these flows to navigate

through multiple borders to reach final destinations. Consequently,

Canada faces four main issues with respect to border and transportation

security in the context of the Gateway and Corridor initiative:

• Security Re-screening: Governments throughout the Asia-Pacific

region are investing billions of dollars to augment technologies and

processes for the secure movement of goods and people. Detection

of explosive threats, for example, is a key imperative under ICAO

Annex 17. Chemical/Biological/Radiation/Nuclear (CBRN) threats are

emerging, and need to be interdicted. Yet in spite of these invest-

ments, differences in standards have prompted nations to re-screen

goods, baggage and people. For the Gateway this potentially dilutes

the advantages of transiting through Canada due to additional costs

and time required.

• Dual Clearance: A comparable issue exists for border clearances.

The Gateway and Corridor initiative positions Canada’s west coast as a

crossroad between Asian markets and the North American economy.

As with aviation security measures, the double clearance of contain-

ers, passengers and cargo transiting through Canada on to the US or

Asia risks mitigating the natural advantage Canada hopes to capture

through gateway development. Land border delays are the most

visible manifestation of this issue, but there are clear implications for

air cargo, container trans-shipping, and air travellers as well.

• Time Delays: Security and border processing for all modes of

transportation typically requires review by officials in a checkpoint

environment. This approach has, since 9/11, grown in time per trans-

action due to new equipment deployment and risk management pro-

cesses. These chokepoints demand a sustainable model of processing

so that delays are reduced. For goods, this is critical for managing

supply-chain costs and time (e.g. reliability, on time delivery). For

passengers, the hassle factor and time spent idling in line-ups are key

issues. One estimate puts the annual cost to the Canadian economy

due to border delays at $13.6 billion; more important to the gateway

is that any delay at the border is equivalent to relocating key markets

such as the United States further away from Canada.

• Changing Threats: The security environment is ever-evolving

with varying threats to both goods and people movement. To

address risks and vulnerabilities in this dynamic environment, there

is a need to identify and address challenges to the security of key

infrastructure and conveyances. For example, it will be important to

prevent the use of Asia-Pacific Gateway and Corridor infrastructure

and systems as conduits for goods or people that could be used to

threaten Canada or other countries. While the security of the Asia-

Pacific Gateway and Corridor is addressed as part of Canada’s national

approach, there will be a need to address specific security require-

ments based on geography, types of movements and threats facedfrom increased traffic.

Figure 4 2: Effect of Border Delays

Security is everyone’s first priority. But enhancing transportation and

border security need not be a zero-sum game in the facilitation of travel-

lers and goods. The adoption of risk management techniques, process

re-engineering, new technologies and international cooperation can

all contribute to the mitigation of delays and bottle-necks that are the

unintended result of new security measures. Fostering a secure Asia-

Pacific gateway will require key choices to be made within the context of

individual modes and inter-modal transfers requisite for efficient transpor-

tation of goods and people.

Recent DevelopmentsCanada is an important global leader in advancing border and security

related initiatives. Due to the tragic events of the 1985 Air India attacks,

Canada was thrust into this role in the mid-1980’s and has further

advanced new models of security and border processing since 9/11. The

following provides a summary of some recent developments:

• Strengthened Cooperation with United States: through the 2001

Smart Border Action Plan, and since 2005 the Security and Prosperity

Partnership.

• Substantial Security Investments: in response to key international

conventions (e.g. ICAO, IMO) for securing major sectors of transporta-

tion

• New Technological and Legislative Tools: including advanced com-

mercial information, advanced passenger information, creation of

new government entities (PSEPC, CBSA, CATSA) and the passage of

Counter-Terrorism legislation.

• Improved Facilitation of Goods and Passengers: such as CANPASS,

bilateral NEXUS/FAST and Partners in Protection programs.


Dual Clearance

As previously noted, a significant amount of Canada’s gateway traffic

involves movements between Asia and the U.S. The challenge of multiple

borders within a Gateway environment requires creative changes to in-

transit flows. The present requirement for dual clearance represents one

of the APGC’s greatest challenges.

Programs such as a permanent Transit Without Visa and U.S.-to-Interna-

tional Transfer Departures Facilities at airports are examples of initiatives

that will enhance transit passenger processes through Canada. Cargo

in-transit programs in Prince Rupert might also serve as a platform with

applications in other markets.

The Government of Canada should consider aggressively

pursuing opportunities to implement new approaches to

minimize or eliminate dual clearance processes.

Multilateral Cooperation

Canada has made excellent progress in redefining its border security

relationships with the United States and Mexico through the North

American Security and Prosperity Partnership (SPP). This co-operative

and holistic approach to managing flows of people and goods should be

extended to our trading partners in Asia. Greater trade facilitation efforts

with our largest trading partners in the region should be augmented with

expanded co-operation between our respective transportation, security,

immigration and border services agencies.

The equivalency and comparability of security systems is an emerging

area relevant to gateways. Recently, Canada, Europe and the United States

moved to one standard for screening gels and liquids for passengers on

commercial flights. Working through the G8, APEC, the International

Maritime Organization, the International Civil Aviation Organization, and

other groups, Canada should continue to advocate for the establishment of

common approaches to security issues. In particular, a focus on maritime

and air travel security is essential. Whether this involves implementing

transportation related deliverables under the SSP or new programs with

APEC, a co-operative framework will assist in opening new route opportu-

nities while minimizing frictions and choke points.

The Government of Canada should consider taking a lead role

in encouraging harmonization and mutual recognition of

transport and border security policies in the Asia Pacific region.

Coordinated Clearance

The importance of ready access for goods/people to the U.S. market is a

critical success factor for the Gateway and Corridor Initiative. Yet contin-

ued evolution of the U.S. threat-risk environment and associated policy

responses threaten to create a “Fortress America” response. Although

this may itself be a detriment to North American competitiveness, such

a response could emerge given the asymmetric development of interna-

tional terrorism.

An important element of reducing border congestion is to “push-out”

the screening of goods and people away from the border. Canada and

the U.S. have been quite successful in implementing pre-screening and

pre-registration programs for people and especially for goods. The regular

exchange of airline passenger data, information on container traffic,

and trusted traveller programs all contribute to reductions in border

delays. More screening and information gathering can be done through

biometrics, information technology, and voluntary pre-registration. Put

another way, frequent border users should be offered more opportunities

to participate in voluntary programs that allow for pre-screening and pre-

registration facilitated by new technologies. Volountary frequent traveller

programs like NEXUS offer the opportunity to facilitate flows of people.

One challenge facing government is how to maximize participation in such

programs and market effectively to a non-English/French/Spanish-speak-

ing market.

The ultimate solution to achieving a seamless border process is for Canada

and the U.S. to focus on joint clearance of passengers and goods at the

perimeter (e.g. first point of entry) and eliminate the need for an obtrusive

clearance process for transborder movement of people and goods.

The Government of Canada should consider aggressively

pursuing perimeter clearance with the U.S.

4.4 Human Resources

Issues and ChallengesAn adequate, well-trained and reliable workforce remains essential for

the smooth and effective functioning of the APGC. There are, however, a

number of challenges related to human resources for an expanded APGC.

Western Canada is suffering a labour shortage. The Royal Bank of Canada’s

January 2006 Provincial Outlook noted that across Canada, concerns were

highest in Alberta, Manitoba and B.C, with Saskatchewan not far behind.

The Canadian Trucking Human Resources Council estimates an additional

37,000 drivers are needed each year, while the Chartered Institute of Logis-

tics and Transport notes that the shortage of skilled logisticians is a serious

concern for firms operating global supply chains. Moreover, shortages in

the automotive and repair, tourism, construction and maintenance sectors

will all put increasing pressure on various aspects of the APGC.

Education and training are another issue. While post secondary institu-

tions are increasing the amount and quality of training options in the fields

of transportation, logistics and supply chain management, the numbers of

students enrolled continues to lag anticipated demand.



Reliability of labour supply is key to success; conversely, an inadequate,

unreliable labour force can significantly limit the potential of the APGC.

Asian shippers still raise past labour disputes at the Port of Vancouver as

cause for concern about the reliability of the port. Reliability is becoming

the key in global logistics, and concerns about reliability increasingly drive

supply chain decisions. The problems the U.S. west coast port and rail sys-

tems experienced in 2004 led key big box distributors and logistics service

providers to use east coast gateways such as Savannah and Charleston to

move Asia-Pacific goods in order to reduce the risks presented by west

coast port and rail reliability. Labour issues potentially threaten the

reputation of the APGC in a similar manner.

Recent Developments Canada’s new government has made improvements to the Temporary

Foreign Worker Program to make it easier for employers in B.C. and Alberta

to hire foreign workers when no Canadian citizens or permanent residents

are available. This has the potential to address immediate shortages. In

the longer term, the new government’s plan to reduce the tax burden to

attract and retain highly skilled workers will also address this shortage.

Industry Canada’s Lean Logistics Technology Roadmap outlines a number

of initiatives by industry organizations, HRSDC, provincial education

ministries and educational institutions to address the provision of trained

logisticians, but notes that more needs to be done to enable Canada to

“move rapidly into the future.”

Partnerships between labour and employers are developing at APGC ports,

and joint marketing efforts are emerging to show customers a united front

and address reliability concerns. This is an important start, although it will

take considerable concerted effort to change the negative perceptions that

exist. While much of the focus has been on the various long-shore labour

disputes in the past, the summer 2005 withdrawal of trucking services by

owner-operators also had a serious impact. The Final Report of the Task

Force on the Transportation and Industrial Relations Issues Related to the

Movement of Containers at British Columbia Lower Mainland Ports noted

that importers in Ontario and Québec were affected and that containers

and vessels were diverted to Seattle and Tacoma to avoid Vancouver.


Immigration

Canadian demographics suggest that the developing labour shortage will

not be addressed by natural growth of the Canadian population. While

achieving increased workforce participation by Canada’s growing Aborigi-

nal population could deal with part of the anticipated shortage, this likely

will not suffice to address the issue. Immigration is a means of addressing

the labour shortage, but this raises other social and economic issues.

The Government of Canada should consider facilitating

targeted immigration to address the current and anticipated

chronic labour shortages.

Education and Training

Post-secondary and industry options for training in transportation, logis-

tics and supply chain management are increasing. Nevertheless, enrol-

ment lags in part since these sectors have a relatively low profile among

Canadian youth and are not seen as strategic career paths. The industry

is attempting to improve marketing to prospective employees to attract

them for training, but it is in competition with other sectors for labour.


provincial governments to establish transportation, logistics,

and supply chain management as a national priority for skills

training and education.

Collective Bargaining

Initiatives planned and underway by labour and management to improve

labour assignments, forecasting and training and conduct joint marketing

illustrate the mutual recognition of joint responsibility for improving the

labour environment and selling a reliable service. Nevertheless, as recent

events show, labour disruptions are still an issue.

The Federal Government has on occasion been drawn into the midst of the

issue in the national interest and has responded with back-to-work legisla-

tion. After-the-fact interventions, however, do not instill confidence in

the on-going reliability of the APGC. Reliability continues to be raised as a

major issue by offshore shippers. More needs to be done to prevent labour

disputes (e.g., mediation, final offer arbitration) before they occur.

The Government of Canada should consider new, innovate

forms of mediation and arbitration to prevent work stoppages

in the transportation sector.

4.5 Pro-Competitive Policy Framework

Issues and ChallengesCanada’s APGC is not the only alternative for moving goods and people

between markets in Asia-Pacific and the U.S. In fact, it is not even the

only alternative for moving goods and people between Asia-Pacific and

Canada, since many U.S. and even Mexican gateway corridor alternatives

are seeking to handle North American traffic to and from Asia. In order to

preserve Canadian jobs and ensure adequate direct transportation service

levels to serve Canadian needs, APGC-based supply chains need to be

competitive on a global level.

Governments must ensure that policies and regulations across various

departments and levels of government are consistent with this objective.

These include economic regulation and taxation policies.

Recent DevelopmentsCanada’s new government has taken a key step in the development of the

APGC by creating a separate Ministerial portfolio for the initiative. This

identifies the APGC as a government priority and indicates its multi-

departmental relevance.

The invitation by the Federal Government for participation of all level of

government is a key step to alignment of the entire policy environment.

Canada’s new government has recently announced a number of initiatives

such as the elimination of the federal net debt by 2021, a review of capital

cost allowances, and other measures to improve competitiveness and

encourage investment. These will help establish a competitive tax regime

for the APGC.

To make Canada’s duty deferral and other customs programs more

competitive with the U.S. FTZ program, Canada introduced the Export Dis-

tribution Centre program in 2001. While it has elements that are superior

to the U.S. version, limitations on value-added activity and export ratios

have made it less attractive than anticipated. Additional planned features

such as the operators certificate have not yet been implemented, further

hindering program take-up.

Canada has also taken significant strides in international air policy.

Recently signed open skies agreements with the U.S. and the U.K. hold

the potential to expand air services. New liberalized air service agree-

ments with China and India are also important for the APGC. Canada’s new

international air policy, which seeks open-skies type agreements as a

primary objective when in the overall interest of the country, is a positive

development. Transport Canada intends to pay special attention to key

Asia-Pacific markets as it implements its new approach.


Policy Alignment

Establishing a true pro-competitive policy environment requires a multi-

departmental effort. Transportation policy alone can not produce the

necessary pro-competitive environment. The APGC needs to be a factor in

the policy development of key departments with responsibility for finance,

taxation, international trade and exports, tourism, industry, customs

and duties, public safety and security, inspection services, labour, human

resources, immigration, training and education, research and develop-

ment, environment, competition, public health, and statistics.

A national pro-competitive policy environment requires alignment of

provincial and federal policies. Federal progress in this area potentially

could be undermined by provincial policy, such as those limiting truck-

ing weights and dimensions, imposing road charges on key APGC links,

or imposing uncompetitive fuel taxes on trucking, rail, and aviation. The

participation and support of western provinces is also critical to the success

of the APGCI.

The creation of a separate Ministerial portfolio for the APGC will raise

the profile of the initiative in the policy-making activities of the various

relevant departments. The question is whether this will be sufficient to

change historically ingrained behaviors wherein staff tend to view their

responsibilities within narrow departmental “silos.”

The Government of Canada should consider incorporating APGC

performance measures in all relevant departments, or take

other steps to achieve internal alignment of goals.

Taxation

Canada’s tax regime needs to be reasonably competitive with respect

to the United States. Canada and Canadians have different social and

economic priorities from the U.S., so the tax regimes will continue to

differ. The challenge is to ensure the competitiveness of the APGC while

maintaining government service expectations of Canadians. Issues have

been raised with respect to federal and provincial fuel taxes, property

taxes, capital cost allowances, and advantages of the tax status of certain

U.S. municipal bond interest payments.


27 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 27 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007

Canada’s tax structure is continually evolving. The recent fiscal update

indicates the new government clearly has a long-term perspective on tax

policy with the objective of achieving lower taxation levels and a more

equitable tax regime. The key is preserving this over the short-to medium

term in order to keep a correspondence with the long-term vision of the

APGC.


provincial and municipal governments to review all relevant

taxation policies to ensure that they do not impede the

competitive position of the APGC.

Foreign Trade Zones

Provision of value-added services is a key function of gateways. The

Foreign Trade Zone program of the U.S. has been an effective tool for

attracting foreign investment and economic activity to the U.S. that might

otherwise take place overseas. The Canada Border Services Agency and

Canada Revenue Agency have a number of programs that offer FTZ-like

benefits, but these programs do not provide as attractive an environment

for this activity.

EDC take-up has been limited in part by its relatively restrictive param-

eters, due to concerns about domestic export manufacturers being

negatively impacted by EDC operations. Some might question whether

this needs to be addressed given that some elements of FTZs have become

less important over time as duties continue to fall. However, U.S. FTZs are

now using security concerns, supply chain evolution, and customs filing

requirements to generate new interest in their program.

The Government should consider overhauling Canada’s

EDC program to make Canada more attractive for foreign

investment in value-added gateway activity.

Air Policy

Canada’s new Blue Sky international air policy is a key step in the direction

of improving access for air carriers, both foreign and domestic, to Canada’s

gateway airports. The nation’s approach to air services negotiations has

moved from an incremental one to a more proactive stance to seek more

open skies type agreements, when in the overall interest of the country.

Canada’s new approach is also to seek more flexibility for all cargo opera-

tions. In this sense, this new policy supports the goals of the APGCI.

It should be noted that the world is gradually changing its position on

foreign ownership of air carriers, and some nations are taking steps to

amend air service agreements to replace the ownership and control provi-

sions with principle place of business provisions. To this end, the Minister

of Transport, Infrastructure and Communities has undertaken consultation

with stakeholders on potential changes to airline ownership restrictions.

Canada does not impose foreign ownership restrictions on bus, trucking or

rail companies.

The Government of Canada should consider reviewing airline

foreign ownership limits.

5.0 TOWARDS COMPETITIVE ADVANTAGE

Canada’s Asia-Pacific Gateway and Corridor has a number of strategic

advantages over competing gateways and transportation networks

including its geographic location and a modern and efficient transporta-

tion system. The fundamental issue is that the relentless growth of trans-

Pacific trade and travel, driven to a large extent by the massive expansion

of the China and India economies, will overload the current transportation

system to the point that congestion and delays will nullify the advantages

of shorter shipping and flight times across the Pacific. Investment in

transportation infrastructure in Asia will provide a quantum increase

in export capacity which needs to be matched on the North American

continent to handle the expected inflow of goods. The U.S. and Mexico are

responding with major investments in ports, rail, highway and airports to

deal with this growing market demand and are poised to capture a larger

share of the Asia-Pacific trade and travel market. Canada needs to respond

quickly to ensure that the competitiveness of the Asia-Pacific Gateway and

Corridor is enhanced or risk being relegated to a secondary role in serving

the needs of global commerce.

By launching the Asia-Pacific Gateway and Corridor Initiative, Canada

has given itself the opportunity to overtake competitive initiatives to the

south. Although other jurisdictions and transportation authorities are

investing in new infrastructure and technology to increase capacity, most

of these efforts are being undertaken independently by mode and not

as part of a coordinated and integrated plan. To realize the vision of the

Asia-Pacific Gateway and Corridor Initiative, the Federal Government will

need to act quickly or the economic benefits of capturing a larger share of

trans-Pacific commerce will be lost to competing transportation networks.

As new shipping and air routes become established along other gateways

and corridors, it will be much more difficult to re-route them to Canada’s

APGC.

The next step is to develop a Strategic Action Plan for the Asia-Pacific

Gateway and Corridor that addresses the strategic issues and challenges

outlined in the previous chapter and takes the action necessary to:

• Optimize and expand the capacity of the Gateway and Corridor for

the short and long term.

• Promote effective corporate governance that facilitates private

investment, improves coordination and enhances accountability.

• Establish more secure and seamless border processes.

• Enhance human resource skills and labour reliability.

• Foster a market-driven and pro-competitive policy framework.

In conclusion, Canada has a tremendous opportunity to capture a

significant share of the transpacific flow of global commerce between the

growing markets of Asia and North America. While there has been a focus

on transportation infrastructure funding, it is important to remember

that this is only part of the equation and that establishing the right

“policy infrastructure” can be even more important in creating competi-

tive advantage for the Asia-Pacific Gateway and Corridor. Canada’s new

government has a bias for action and a strong commitment to enhancing

Canada’s competitiveness. Moving quickly to develop and implement a

Strategic Action Plan for the APGCI and establishing an interdepartmental

task force to develop an integrated policy framework will ensure the suc-

cess of the Asia-Pacific Gateway and Corridor Initiative and realization of

its long term vision.


Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context for Competitive Advantage

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